“We started cutting back in our healthy companies the weekend before the first bailout because it was taking too long,” says Robert Nelsen, a managing director with Arch Venture Partners in Seattle, in an e-mail. “The additional week it took after the first ‘No’ vote, created even more uncertainty and is partly causal for the spiral we are in now.”

President Bush first proposed a $700 million bailout of the U.S. financial system on September 20. The House of Representatives rejected the first plan on September 29 by a 228-205 vote.

When it saw the plan stalling, Arch sent a letter to its companies requesting contingency plans and outlines for spending cuts. “Many of these companies are well-funded, but survival is everything, so we will be cutting more,” Nelsen says.

Interestingly, Nelsen says that Sequoia’s alarming message applies more to software and media companies than those in other industries, like life sciences. Companies with disruptive technologies tend to have the best networks of investors backing them, and are usually last to get cut from corporate business development budgets, so they can survive longer, he says. “In 2000, we made some of our best investments when VCs in the Valley freaked out and declared venture capital is dead for the nth time,” Nelsen says. Still, he’s not going so far as to say this is another historic buying opportunity. “My guess is we are all in for a severe whack, but not a depression, but who knows,” he says.